Metro News & Reviews

Villaraigosa explains 30/10 Initiative to House Committee

One of the charts that Mayor Villaraigosa submitted to Congress to explain the 30/10 Initiative. Click above to see larger image.

Los Angeles Mayor Antonio Villaraigosa is in Washington D.C. today to testify before Congress on the 30/10 Initiative that Metro is pursuing. Attentive readers will recall that the 30/10 plan proposes to build a dozen Measure R transit projects in the next 10 years instead of the next 30. Villaraigosa is also a member of the Board of Directors of Metro.

Click above to see larger image.

The above chart explains the 30/10 timeline. It’s obviously ambitious. In order for it to happen, Metro needs to secure $8 billion in funding from the federal government, which Metro would then pay back using Measure R sales tax funds. The challenge is that this has never been done before to build urban transit systems.

Villaraigosa’s written testimony is below. I encourage you to read it — it provides a very good overview of the different types of loans and bonds that could be used to finance the 30/10 Initiative. And here’s a link to the Ways and Means web page on today’s hearing.

United States House Committee on Ways and Means
Subcommittee on Select Revenue Measures
Testimony of Los Angeles Mayor Antonio R. Villaraigosa
May 13, 2010

Thank you Chairman Neal, Ranking Member Tiberi, and members of the subcommittee for the opportunity to address “Proposals to Establish an Infrastructure Bank.” Your focus on the fiscal and policy implications of initiatives to stimulate critical infrastructure investment is important and timely for the nation and for Los Angeles in particular.

Introduction

Los Angeles is the car capital of the world, with the traffic congestion and air quality to prove it. Despite dramatic improvements in our air quality over the past four decades, Los Angeles continues to have some of the dirtiest air in the U.S. And, according to the Texas Transportation Institute, we continue to have the highest levels of traffic congestion in the U.S. Angelenos spend an average of 70 extra hours each year stuck in traffic. In total, we waste 367 million extra gallons of fuel and 485 million hours at an estimated cost of $10.3 billion to our regional economy.

At the same time, we have invested heavily in our transportation infrastructure and made progress in stemming the growth of traffic congestion. While most other major
U.S. cities have seen congestion grow since 1997 – even those with major transit systems – Los Angeles’ congestion levels have remained constant despite population increases.

We have done this by strategically expanding our car pool lane system, synchronizing our traffic lights, and expanding our mass transit system. Our first rail line of the modern era opened in 1990, connecting the City of Long Beach and downtown Los Angeles. Since then, we have invested heavily in expanding our light rail, heavy rail, and commuter rail systems. Concurrently, we have seen an explosion of rail ridership in Los Angeles. From 1996 to 2008, overall rail trips increased 150%, with light rail growing 90%, heavy rail growing 275% (after opening subway legs to Hollywood, Universal City, and North Hollywood), and commuter rail growing 126%.

According to the 2008 National Transit Database Los Angeles ranks third in the nation in total transit boardings (474 million), trailing only New York and Chicago. We also are ranked tenth in rail boardings. And our growing heavy rail system (subway) is top in the U.S. in passengers per hour (“Unlinked Passenger Trips per Vehicle Revenue Hour”), beating out both New York and Chicago. These data suggest that there is there is a market for rail transit in Los Angeles. At the same time, we have continued to invest in our bus system, innovating new “Rapid Bus” service, building a 14-mile bus rapid transit project (Orange Line), operating the largest clean fuel bus system in the U.S., and winning the 2006 American Public Transportation Association’s best large transit operator award.

Transit is the Future in Los Angeles

Public transit plays a vital role in cities, relieving traffic congestion, improving air quality, and providing lifeline service to the transit dependent so that they have access to full range of opportunities they need to prosper, from jobs and shopping to medical services, education, and recreation. But in cities like Los Angeles, we are essentially built out. There is little undeveloped land beyond our parks and clearly there is no room to build new freeways to ease traffic without ripping out neighborhoods wholesale, which I strongly oppose.

When I ran for mayor of Los Angeles in 2001 and again in 2005 (when I was elected), a cornerstone of my platform was making our city and our region more sustainable. A key part of building sustainable communities is investing in clean rail transit. I argued then and continue to believe today that Los Angeles needs a greatly expanded rail system to remain competitive in the 21st century and if we are to grow into a truly sustainable metropolis made up of livable communities.

Therefore, we are investing heavily in transit, retrofitting our city and region with new systems that provide clean, reliable alternatives to driving. At the same time, we are working to create sustainable communities around our rail stations, neighborhoods where walking, cycling, and transit can connect people to the places they want to go and the people they want to see. We are supporting major anchor developments in transit oriented districts and between 2005 and 2009 over 40% of all new construction has occurred near rail stations.

As mayor and a member of the 13-member Los Angeles County Metropolitan Transportation Authority’s (MTA) Board of Directors, I have worked with my colleagues to start important planning and environmental studies for new rail lines that precede construction. We have done so because we know that major public works projects are not built overnight and that pre-construction work must continue even as we work to identify funding for our ambitious rail program.

The Measure R Story – Cities Investing in Transportation Infrastructure

In 2008, in the midst of a national economic recession, Los Angeles voters said “yes” to cleaner air, jobs, and livable communities and supported Measure R, a 30-year half-cent sales tax dedicated to transportation investments. Over two million voters and two-thirds (67.9%) of those casting votes on November 4, 2008 supported Measure R. While surprising to many, we were confident that our voters again would choose to invest in themselves and the transportation future of our city and our region.

Measure R will generate an estimated $36 billion in revenue over the next 30 years, according to our latest projections. It is a multi-modal funding source, dedicating 20% of revenue for highway improvements. In addition, local cities in the County of Los Angeles receive 15% of the revenue by population formula that they can spend on local projects that improve mobility, transit, cycling, and pedestrian access. But the majority (65%) of funding is dedicated to transit capital projects and transit operations. And the construction of Measure R projects will create thousands of new, high quality jobs.

Measure R can serve as a model for local investment in transportation. This is the third time the Los Angeles electorate has voted to tax itself for a better tomorrow. Previously, our voters passed half-cent sales taxes in 1980 and 1990. As a result, Los Angeles has been able to make massive investments in public transit and our highway system. We have had matching funds to compete for and secure state and federal transportation funding, including federal New Starts to support our heavy rail and light rail expansion. And we have had additional operating funds that have allowed us to keep our fares low.

MTA 2009 Long Range Transportation Plan – Consensus Transit Projects

Last year, the MTA Board of Directors unanimously adopted a new Long Range Transportation Plan (LRTP), which serves as the blue print for our transportation investments over the next 30 years. Our plan represents an MTA Board consensus of support for the 12 transit projects approved by voters in Measure R. Thanks to Measure R, we will be able to expand our rail system dramatically, building 12 new rail and bus rapid transit (BRT) lines and adding an estimated 78 miles of new service. Our plan assumes that 65% of its transit construction funding will come from Measure R, 23% from Section 5309 New Starts grants, and 12% from other local, state, and federal funds.

The construction and operation of these lines will yield significant regional benefits. We will remove from the environment 570,000 pounds of emissions annually. We will use 10.3 million fewer gallons of gasoline. We will drive 208 million fewer miles each year. And we will increase annual transit use by 77 million trips.

Unfortunately, 30 years is too long to wait if we can find a way to build these projects faster. Our “30/10 initiative” is a proposal to accelerate construction of 12 new mass transit lines and build these projects over the next decade. (See Appendix A for a list of the projects and their accelerated time schedule under 30/10.)

30/10 will create jobs, secure our energy future, and make Los Angeles move sustainable and livable. By transforming our region, we will achieve the many benefits in the near-term, in time to see and appreciate them. Specifically, we would triple the number of construction jobs in Southern California (not just Los Angeles), with an average of over 16,000 jobs annually. These would be career jobs in the construction trades, not short-term employment. We would see 1.8 times less carbon monoxide (CO) and 2.4 times less nitrous oxides (NOx) over the next 30 years. And we would see an expanded rail network connecting many of the most important employment and population centers in our region.

We believe that there is a compelling local and national interest in getting the jobs and environmental benefits of our transit program as quickly as possible. One of our 12 projects is already under construction and we expect to break ground on a second project later this year. Another seven projects are in some stage of formal pre-construction development (planning, environmental, or design).

By accelerating our transit program, we can reduce construction costs by 25% from avoided cost inflation alone, from $17.5 billion over 30 years to $13.7 billion over 10 years (figures updated from March 2010). In addition, the soft construction market provides an opportunity to put Americans back to work and save money building new rail lines. We have seen aggressive bidding on public works projects by companies hungry for work, with bids coming in ten, twenty, or more percent under the engineer’s estimate.

The challenge we face is that our adopted Long Range Transportation Plan only has $5.8 billion in transit capital funding capacity for the Measure R projects over the next decade. This means a shortfall of nearly $8 billion in meeting the 30/10 plan. At the same time, we will have an estimated $10.4 billion of Measure R transit construction money in the second and third decades of our plan that we want to tap now.

We have explored using existing federal programs, such as the Department of Transportation’s TIGER discretionary grant program and the Transportation Infrastructure Finance and Innovation Act (TIFIA) credit program. But there is insufficient capacity in these programs to accommodate the 30/10 initiative. Los Angeles voters have made the major commitment of approving the new Measure R funding stream, but we need federal assistance in monetizing it in a cost-effective manner.

We have followed with great interest recent proposals for establishing a National Infrastructure Bank by Representative Rosa DeLauro and Senator Chris Dodd. Likewise, we have noted the President’s FY 2011 budget proposal to establish a National Infrastructure Innovation and Finance Fund (the I-Fund), designed to assist major investments of national or regional significance. Each of these programs would substantially expand federal lending capacity beyond the existing TIFIA levels. We support any approach that can provide lendable funds at the same rates and flexible terms as the existing TIFIA program.

We also believe there is a special opportunity through an infrastructure bank or an I-fund to allocate new, Congressionally-authorized tax-preferred bonding authority for transit investments. Such programs have been extremely valuable in stimulating investment in other infrastructure sectors, such as public schools. For example, last month, the Los Angeles Unified School District successfully marketed $290 million of Qualified School Construction Bonds, a new form of tax credit bond for educational facilities that provides a direct-pay interest subsidy to the issuer. These bonds, and several other categories of tax credit bonds authorized by Congress in recent years, provide a much deeper interest subsidy than conventional tax-exempt bonds or Build America Bonds (BABs). Depending on the program; the federal government will subsidize up to 100% of the interest expense, with the borrower being responsible for repaying the principal.

Given the environmental, energy independence, safety and “livability” benefits of major public transportation investments, we think a compelling argument can be made for a similar targeted program for transit, while volume capping it for fiscal control. Even though the bonds would be issued locally, the volume cap could be allocated by the infrastructure bank or the I-Fund to those major projects and programs offering the highest societal return on investment.

It should be noted that the existing 100% tax credit bond programs have constrained bond maturities in order to limit the present-value federal share of total project costs to 50 percent. However, the long-lived nature of transit improvements and their substantial positive “spillover” benefits warrant a longer bond maturity and correspondingly higher subsidy. It is proposed that the maximum maturity of transit-oriented tax credit bonds be 35-40 years. This term is similar to the final maturity of many of the existing BABs issues. The proposed structure will allow Metro to more than double the amount of capital investment supportable by Measure R revenues, compared to conventional tax-exempt bond issuance.

Together, an expanded TIFIA-style federal credit program and a targeted “specified” tax credit bond program for transit investments of national significance administered by an infrastructure bank or I-Fund would allow Los Angeles to more effectively raise the upfront capital needed to achieve the accelerated benefits of the 30/10 initiative.

Conclusion

As Congress continues its important focus on stimulating the U.S. economy, we believe an infrastructure bank or investment fund could play an important role in helping sponsors of major public transportation investments capitalize, literally and figuratively, on local revenue streams. In this way, Congress could encourage state and local governments to invest in the transportation infrastructure that is essential to maintaining the competitiveness and sustainability of the U.S. in the 21st century and enable the federal government to leverage its resources strategically.

Attached are additional supplemental materials related to our 30/10 initiative, Measure R, and the job creation benefits of investing in public transit. Please do not hesitate to contact me directly or Deputy Mayor Jaime de la Vega at (213) 978-2360 or jaime.delavega@lacity.org before or after the hearing if you have any questions.

Thank you for providing me with the opportunity to submit this testimony. I look forward to working collaboratively with you and this committee in the future to forge a partnership that will help us create quality jobs and clean up the environment.